A snapshot of industrial, retail and office markets

JLL New Zealand explores how commercial property is performing in the country’s three largest cities and how those markets are poised for the remainder of the year

Industrial Market

The logistics and industrial property markets in Auckland, Wellington and Christchurch continue to be the most active. Low availability of stock, limited opportunities for development and unrelenting demand continue to push industrial rental rates upward.

In addition to the above, a myriad of additional factors like supply chain issues have seen vacancy maintain record low levels in Auckland’s industrial precincts. With vacancy sitting at around a mere 0.9%, tenants are competing strongly for quality space with prime yields maintaining a historical low from the previous quarter while secondary industrial yields firmed due to the competitive nature of the sector.

The current market conditions in Wellington are tight, with no signs of any relent in the pressure on the extremely low vacancy levels for the foreseeable future. While demand remains high, little is being added to supply with the pipeline bottlenecked by the continuance of rising land and constructions costs as well as the diminishing availability of industrial development land.

While both Auckland and Wellington share a similar story, Christchurch is drawing on its potential to deliver on interest from a wider pool of occupiers and investors capitalizing from a more sustainable and longer-term supply of land. Investors remain interested in Christchurch although new developers will still need to take note of required rentals to provide the appropriate returns to meet investment thresholds.

Office Market

This year has seen the continuation of workspace strategies evolving, with an increase in requirement from occupiers towards employee health and wellbeing and fulfilling green initiatives. Quality office spaces will remain a key strategy for occupiers as part of their retention and attracting of staff.

While overall vacancy has increased in the Auckland CBD, there is an uneven spread of occupancy across the city on a building-by-building basis. Meanwhile vacancy among offices on the Auckland city fringe has decreased. However, with the borders due to open there is an expectation for investment enquiry to increase along with the ‘great return to work’ which will see occupancy levels rise once more.

Vacancy rates in the Wellington office property market illustrate a unique story with prime increasing minimally to a mere 1.1%, while secondary vacancy decreased to just 4.3%. Occupation is being driven by government tenants and lack of office supply, however there are a number of office developments in the pipeline with many offering mixed use. While these are predominantly already fully pre-leased, this is expected to create a quantum of backfill space in A-grade buildings.

While there were no office completions in Christchurch for the first quarter of 2022, there are many developments in the pipeline including 28 in the central business district alone. As a consequence of the historically low vacancy levels among prime office offering, demand for secondary properties has been bolstered.

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Retail Market

Even though the retail property market continues to be one of the hardest hit industries from the pandemic due to enforced lockdowns and trading restrictions, increased leasing momentum indicates a positive direction since the pandemic made its presence known. While there are few sole retail developments in the pipeline in New Zealand, retail is a key component of several mixed-use developments comprising office, hotel or apartments.

Overall vacancy among retail real estate in the Auckland CBD decreased during the quarter, showing uptake of vacant opportunities as come to the market. The future of Auckland CBD retail will be supported by employees returning to the office, students to university and tourism. Demand has maintained for suburban retail with many consumers opting to shop locally while working from home.

Wellington’s “Golden Mile” extending from the Parliament end of Lambton Quay, along Willis St and through to Manners St to the eastern end and entertainment hub of Courtenay Place is expect to gain back its momentum after being hit hard by the reduced footfall. Average gross rents have held steady as have yields.

The outlook for retail real estate in Christchurch remains positive with continued low vacancy in both suburban and CBD precincts. With borders due to open and workers returning to the workplace, the CBD is set to benefit from an influx of footfall, while it is expected that suburban retail will continue to benefit from the ‘shop local’ philosophy for those that have adopted hybrid or remote working structures.

How BIM Will Impact Your Future Infrastructure Projects

For nearly 40 years, building information modelling (BIM) has been a mainstay in architecture circles within the industry. But it’s only really gained ground in actual construction over the last two decades. If your company is among these near-future BIM adopters, what impact can you anticipate for your projects?

Financial efficiency with better use of capital project data

Having to rely on traditional construction practices involving 2D drawings and decentralised project details can be very limiting. Think of all the data that starts rolling in from day one. And it continues to accumulate when the completed project has been handed over to the owner’s operations and facility management team. It can be somewhat of a challenge, not to mention overwhelming, to track and understand everything.

Buy that’s where BIM can help. What often makes it stand out is the BIM model’s ability to link directly to all the details associated with each individual element within it, from the smallest nail to the largest volume of concrete. Those include all usable and actionable data, including size, current cost, replacement value, lifespan, warranty information and more. These specific details — or project intelligence — can be leveraged again and again throughout the project’s construction and beyond from within its own common data environment (CDE).

The key is to enter all that data into the BIM model during the estimate phase so it can serve as an interactive reference going forward. That’s when it becomes the foundation construction begins opens up opportunities to experience things you hadn’t been able to with traditional design methods. For instance, designing a structure through BIM modelling frees you up to experiment with variations on materials, exteriors, door and window placement, layout configurations, and more. You’re able to virtually

for data-driven decision making. Based on the model-linked data, the owner, contractors and other stakeholders can evaluate and agree on the most appropriate material and equipment options to invest in for the project based on cost effectiveness, durability and/or repair record, for example.

Optimised design phase efficiency

Building your project through BIM before real walk through a model for a realistic view of the flow, the aesthetics, the space, and even any design mistakes to fix on the spot.

The BIM process also acts like a risk mitigation tool enabling you to discover structural and spatial interferences through automated clash detection. Catching these early enables you to correct them at the design stage — before they’ve had a chance to be built into the structure, which would set the stage for change orders for anything from minor alterations to full-on budget-eating rework down the road. You preserve not only the original cost and schedule estimate, but your profit margin.

Maximising design phase efficiency with BIM means being confident that those choices you make for your future capital projects are cost-efficient with regard to the construction estimate and to future maintenance after handoff.

Interactive data to foster interactive teams

Being able to access and interact with all your projects’ constantly updated details at such a granular level is the kind of transparency that sets the stage for better understanding of the build and more effective communication among project teams, including those disciplines that may not normally have had a seat at the design table.

With all the data linked from the model housed in BIM’s CDE, it serves as a central hub where everyone can interact with the wealth of information it contains. Teams can interact with each other — sharing updated models, asking and answering questions, suggesting modification ideas, reviewing solutions to problems oftentimes before they occur.